Question

a preferred stock from hecla mining company (hlprb) pays $3.20 in annual dividends. if the required rate of return on the preferred stock is 7.6 percent, what is the fair present value of the stock?

Answer 1

To find the fair present value of the preferred stock, divide the annual dividends by the required rate of return.

Step-by-step explanation:

To find the fair present value of the preferred stock, we need to use the formula for calculating present value. The formula is: Present Value = Annual Dividends / Required Rate of Return

In this case, the annual dividends are $3.20 and the required rate of return is 7.6 percent. Converting the rate to decimal form, we get 0.076. Plugging in the values, the present value of the stock is $3.20 / 0.076 = $42.11 per share.

Therefore, the fair present value of the stock is approximately $42.11 per share.